Think Big: What Could Change Our Industry

Here are some thoughts on big actions that industry incumbents could take to strengthen their positions and the U.S. payments industry. What do these ideas have in common? First of all, they are infrastructural or market-wide. Secondly, they all ask one or more incumbent constituencies to bite the bullet – and accept some reduction of current revenue (aka “cannibalization”) in order to secure a stronger future position. Can they do it? Christenson talked about “The Innovator’s Dilemma” – maybe this is the “Incumbent’s Challenge”.

Rethink CNP

The card networks could issue new rules specifying secure “card not present” transactions, with liability protections and interchange close to point-of-sale parameters. Could apply to cloud wallets but also to “card on file” transactions which meet certain card-network-specified standards.

Dongles for All

Card issuers – credit and debit – could distribute mobile card acceptance “dongles” broadly to their customer bases. After all, it’s just a way of getting deposits in, right? Card networks could support with rules and interchange structures to support P2P and other domain usage.

Commercial Card Economics

The card networks are getting shut out of the serious B2B opportunity – particularly in cross-border payments – with unrealistic interchange levels. Drastically lower (and capped!) rates could open up much larger opportunities.

UPIC for All

Banks in the United States could support a universal account-aliasing system that would be used for all domains (B2B, P2P, C2B, etc.). The Clearing House’s old “UPIC” scheme is a good example – Australia’s BPAY system is even smarter.

Faster Payments

Banks could create a real-time, broadly used system similar to systems in place or in implementation around the world. Faster, better, cheaper – more of my thoughts here.

Dollar Chip?

Speaking of incumbents, maybe the Federal government could issue digital money? Canada’s already thinking about it (see: MintChip).

Savvy marketers shouldn’t bother with anything that’s “faster, better and cheaper”, all at the same time. For example, if they come up with something that’s faster and better, they should charge a premium for it. Otherwise, what’s the point? Banks in UK have lost a wonderful opportunity to generate additional revenue streams out of Faster Payments. Hopefully banks in other countries think of the revenue model before rushing in with their own versions of FPS. If they look around, they should be able to find suitable models from tech and other industries.